Did you know that one of the main reasons why small businesses fail is because of poor cash flow? Maintaining cash flow levels is a key challenge, and it’s critical to your small businesses’ success. Staying on top of past-due customer invoices is one of the best ways to monitor your cash flow. One of the best tools you can use in your small business to keep an eye on past due accounts and monitor cash flow is an Accounts Receivable (AR) Aging Report.

What is an AR Aging Report?

An AR aging report provides you an overview of your customers’ outstanding balances. It’s a tool often used by small businesses to determine the financial health of their customers by showing the balances due from customers that are falling behind on their payments. So the longer it takes a customer to pay you, the higher the risk you run of that money not being collected.

What are the Benefits of Using an AR Aging Report?

An AR aging report helps small businesses readily identify unpaid invoices and any potential delinquency issues with customers. With this accounting report, you can evaluate payment terms and business relationships with customers. As a result, you’ll be equipped to make informed decisions regarding future payment terms, and you may even determine you want to sever ties with poor paying customers. Unfortunately, this comes with the territory when you’re a small business owner!

AR Aging reports also helps you identify when to follow-up on invoices because they show you invoices that are “current” – meaning they are not past due, and then also show you invoices that are 1-30, 31-60, 61-90, and 90+ days past due. We recommend always following up on late receivables, but you can focus your efforts on contacting delinquent accounts that have the highest balances and the oldest balances first, as these create the highest risk to your cash flow collectibility.

How Do I Prepare an AR Aging Report?

When you use accounting software, an AR aging report can easily be run with just a few clicks of your mouse. In this video tutorial on our YouTube channel, I show you how easy it is to access and customize an AR Aging Summary Report in QuickBooks Online.

Ready to Start Using an AR Aging Report to Manage Your Cash Flow?

Without an AR aging report, it can be challenging to maintain a healthy cash flow in your business and even more difficult to identify potential bad credit risks. By utilizing your accounting system, you can easily review your AR aging report monthly allowing you to keep your finger on the pulse of your customer’s financial health.

If you’re interested in checking out QuickBooks to help you manage your small business’s finances, click here to get 50% off your first 12 months.

Also, don’t forget to check out our other QuickBooks Tips & Tutorials on our YouTube channel.

If you’d like to learn more about utilizing accounting reports to manage your business finances, we’d love to talk with you about your financial needs and help you find a path to meeting your goals. Schedule your clarity session with us today: book your clarity session. 

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Disclaimer: This blog and the linked videos are intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.